SG Homes Associates, LP v. Michael Marinucci
2013 U.S. App. LEXIS 11176
| 4th Cir. | 2013Background
- Marinucci was president and 50% owner of Chesapeake Site Contracting, which worked on the Crabbs Branch Way project.
- Chesapeake sought a bond; SG Homes ultimately required a bond; written contract was later executed May 12, 2008, with ambiguities about bonding.
- Chesapeake paid subcontractors from a common fund, including funds not tied to the Crabbs Branch Way project.
- Maryland Construction Trust Statute requires funds paid to a contractor for a project to be used to pay that job’s subcontractors.
- SG Homes paid $208,806.89 to subcontractors; SG Homes claimed Chesapeake had not paid them and that fraud occurred.
- Bankruptcy court found fraud, awarded $208,806.89, and held the debt nondischargeable under 11 U.S.C. § 523(a)(2)(A).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was SG Homes justified in relying on certifications in payment applications? | SG Homes relied on certifications that funds were used for Crabbs Branch Way subcontractors. | Certifications covered all payments generally; not limited to Crabbs Branch Way. | Yes; reliance was justified; certifications read with the Contract supported reliance. |
| Are damages properly proven and quantified for double payments? | Double payment of $208,806.89 was proven by invoices and testimony. | Offsets and unreviewed invoices undermine the amount; no net damages shown. | Damages of $208,806.89 affirmed; burden shifted to Marinucci with weak rebuttal. |
| Does the fraud establish nondischargeability under 523(a)(2)(A)? | Fraud existed via misrepresentation and misapplication of funds; damages shown. | Fraud elements not adequately proven; disallowance improper. | Yes; debt deemed nondischargeable under 523(a)(2)(A). |
Key Cases Cited
- Nunnery v. Rountree, 478 F.3d 215 (4th Cir. 2007) (elements of common-law fraud for § 523(a)(2)(A))
- Gourdine v. Crews, 955 A.2d 769 (Md. 2008) (common-law fraud standards applied to dischargeability)
- Field v. Mans, 516 U.S. 59 (S. Ct. 1995) (operative terms of fraud are common-law concepts)
- Ray v. William G. Eurice & Bros., Inc., 93 A.2d 272 (Md. 1952) (reading integrated documents as part of contract interpretation)
- Hinkle v. Rockville Motor Co., 278 A.2d 42 (Md. 1971) (flexibility theory for damages in fraud cases)
- Buie v. Sys. Automation Corp., 918 F.2d 955 (4th Cir. 1990) (benefit-of-the-bargain damages may be used in appropriate cases)
- Empire Realty Co. v. Fleisher, 305 A.2d 144 (Md. 1973) (damages proof and measure in fraud cases)
- Goldstein v. Miles, 859 A.2d 313 (Md. Ct. Spec. App. 2004) (out-of-pocket damages framework under Maryland law)